QDRO
I have a question regarding QDROs. My understanding is that in a divorce the splitting of retirement assets specifically in a qualified employer plan can be divided using the QDRO. It is also my understanding that the relinquishing spouse has to pay the taxes on the portion that left his or her plan to fund the QDRO. Does that mean that the QDRO is a non-qualified plan? I guess I am looking for a better understanding of the rules surrounding QDROs.
Permalink Submitted by Alan - IRA critic on Mon, 2013-09-23 22:49
The taxable income from a distribution under a QDRO goes to the “alternate payee”, ie the receiving spouse, child etc. Splitting of the plan itself is not a taxable event, which only occurs when a distribution out of the plan occurs that is not rolled over. Once the funds are rolled to an IRA, the alternate payee is subject to IRA rules which do NOT include a penalty waiver as a result of the QDRO. Here is a link explaining QDROs in detail including additional links on the subject: http://www.retirementdictionary.com/definitions/qualifieddomesticrelationsorder